Value context and insight. lkm@koreatimes.co.kr
Asset managers rushing to acquire buildings in London
By Lee Kyung-min
By Lee Kyung-min
Korea's major asset management firms are rushing to purchase commercial properties in London, amid Brexit-triggered market volatility and the resulting depreciation of both the British pound and real estate.
The move is also part of efforts to diversify investment portfolios, seeking relatively high returns amid the domestic market nearing saturation.
According to local reports, the U.K. is scheduled to leave the European Union March 29, while much remains unclear what will happen if British Members of Parliament reject the withdrawal agreement.
Kiwoom Asset Management set up a five-year, 87.5 billion won ($78.1 million) fund in 2018 to buy shares in an office building in the financial district of London, known as the City of London or the Square Mile.
The investment seeks capital gains derived from rent and sales of buildings, with an annual return of 6.77 percent promised to investors.
This is in addition to its earlier investment of 52 billion won in 110 units of care facilities that can house about 9,000 disabled and elderly patients in various areas including London.
Hana Alternative Asset Management established a similar investment portfolio where it spent 130 billion won on a building in the commercial area and some 160 billion won to buy Sanctuary Buildings in Westminster in the city.
NH Investment and Securities and Mirae Asset Global Investment bought the Cannon Bridge House for 380 billion won and KB acquired a building in Shaftesbury Avenue in the city.
While some investors remaining fearful of uncertainties involving Brexit seek to reduce investment altogether, others find them an “attractive opportunity,” according to an expert.
The British real estate market and the country's currency took a big hit following 2016, when the idea of Brexit first took shape. To some investors, the dropped property value is a rare opportunity to seek handsome capital gains.
“Buying a building is largely considered a stable source of income, almost a guaranteed way to make money given it is highly unlikely for financially delinquent tenants to secure a lease in the highly commercialized, posh area,” a Mirae Asset Global Investments official said.
Expanding business portfolios to property purchases in London is a proven investment method not only for private financial services firms but also institutional investors in Korea.
The National Pension Service bought Plumtree Court, the 10-storey building which will serve as Goldman Sachs' European headquarters for 1.68 trillion won (1.17 billion pounds).